Tiger Global Management, the hedge fund firm founded by
Charles (Chase) Coleman, is the latest firm founded by a Tiger
Management veteran planning to launch a long-only fund.
"We remain encouraged by the number and quality of ideas we
are identifying on the long side of the portfolio but continue
to view fund size as a long-term constraint given the
difficulty of scaling our short portfolio," the firm stated in
its second quarter letter to investors, dated August 1. Tiger
Global said it plans to limit the fund's starting assets "to a
manageable size," without specifying the amount of assets, and
stressed that insiders will make "a meaningful commitment."
The hedge fund firm said the long-only fund is still in the
planning stages and it is mulling the fund's structure, but it
stressed that "its decisions will ensure alignment of interests
with our limited partners, proper incentive structures to keep
our investment team focused on both long and short ideas, and
maximization of the synergies with our existing businesses."
The firm has set a preliminarily launch date of October 1, 2013
for the new vehicle
Tiger Global is at least the third Tiger Cub to plan a
long-only fund this year alone. We reported last month that Jonathan
Auerbach's Hound Partners said it has been considering
launching a long-only fund for the past year and a half. "We
are actively debating the pros and cons of offering such a
vehicle and would love your feedback," Auerbach told
Earlier this year, we reported that Tiger Cub Philippe
Laffont's Coatue Management filed plans with the Securities and
Exchange Commission to launch a long-only fund. Tiger
Cub-founded firms running successful long-only funds include
Stephen Mandel, Jr.'s Lone Pine Capital, O. Andreas Halvorsen's
Viking Capital and Lee Ainslie's Maverick Capital.
The firm appears to have picked a good time to start a
long-only fund. Performance for Tiger Global's main hedge fund
has been tepid this year compared with previous years, in part
because of losses incurred from its short portfolio. In the
second quarter the fund, Tiger Global, gained just 0.6 percent
net of fees. In the first half of the year, the fund gained 5.5
percent compared with gains of 13.8 percent for the S&P
500, 8.8 percent for the MSCI World Index and 13.4 percent for
the Nasdaq Composite.
Last year the hedge fund, which Coleman manages with partner
Feroz Dewan, posted a 21 percent gain and over the past few
years the team has scored big from Internet, technology and
media stocks - some of them in emerging markets - as well as
shrewd shorts. Last year Coleman earned $350 million, landing
him at the number 12 spot on Alpha's annual Rich
List of top-earning hedge fund managers.
In its second-quarter letter, Tiger Global told clients that
over the years, its long investments have compounded annually
at 22 percent gross and 17 percent net compared with just 4
percent for both the MSCI World and the S&P 500 over the
same period. "We believe we could scale many of these
investments with little impact to our existing long portfolio
while providing attractive returns to investors," the hedge
fund firm stated in the letter.
Tiger Global also said it has been hurt lately by its short
portfolio and provided some insight into how it maneuvers its
negative bets through a treacherous environment. "As a core
part of our research process, we strive to anticipate how we
will act if and when a position goes against us," it explained.
"In an ideal world, we would add to a short position at higher,
more attractive prices. Over the last several months, however,
improving macroeconomic trends have led us to change
assumptions in some of our models, resulting in an inferior
prospective risk/reward equation." As a result, the fund
reduced a few of these positions.
Tiger Global also told clients that it was hurt in the
second quarter by poor performance in emerging markets. "China
in particular is under intense scrutiny as growth slows and
investors have shifted their focus to the credit intensity of
the country's economic model," it added. "While valuations have
begun to come down and we expect that volatility should provide
opportunities to add to companies on our wish list, we intend
to be patient and disciplined while selecting investments we
feel can outperform over a multi-year period."
Coleman has emerged as one of the most successful Tiger
Cubs. He currently runs a total of $12 billion, including about
$6 billion in private equity investments.
Tiger Global last quarter offered all investors the
opportunity to withdraw capital on June 30 regardless of
existing liquidity terms. However, the New York hedge fund firm
founded by Tiger Cub Chase Coleman said less than 1 percent of
the fund's assets were redeemed.
As a result, currently assets under management now stand at